Bond Market Signals Rate Cut Expectations Surge to 83%

Treasurie saw a mixed session Wednesday—after an early dip, bonds climbed back to close roughly flat. The benchmark 10-year yield dropped below 4% for the first time since late October, closing at 3.998%, down from a session high of 4.042%.

Here’s what’s moving markets:

The Big Shift in Rate Cut Odds Fed rate cut expectations for next month just jumped dramatically. CME FedWatch Tool shows the probability of another 25bp cut surged to 82.9% from just 30.1% a week ago—a massive swing driven by dovish Fed commentary.

Economic Data Came in Hot (But Didn’t Shake the Narrative)

• Durable goods orders rose 0.5% in September (vs. 0.3% expected)—better than expected
• Initial jobless claims fell unexpectedly to 216,000, hitting 8-month lows

So you’ve got strong economic data, but traders are still pricing in an 83% chance the Fed eases policy anyway. That’s the real story here.

Why Bonds Rebounded The early selloff looked like standard profit-taking after treasuries had climbed for six of the last seven sessions. But as traders digested Fed officials’ dovish remarks, buying pressure returned. The pessimism-on-growth narrative is still winning out over the economic strength data.

What’s Next With Thanksgiving Thursday and a light data calendar Friday, expect quieter trading. The market’s already pricing in the cut—next catalyst will be Fed communications.